Tax Cheats Granted Amnesty For Paying Up

Slogans normally promote consumer goods and political campaigns, but earlier this year California`s tax collectors aimed a pithy phrase at the state`s tax cheats.

The message: ``Get to us before we get to you.``

Many did. Over a tax amnesty period of about three months, more than 130,000 people turned themselves in for evading California`s various taxes in past years. Although back interest was still owed, penalties for evasion were dropped.

The collections, still being tallied, will likely exceed $150 million.

Since 1981, tax amnesty programs have been tried in 12 states, from Alabama to Arizona, collecting more than $370 million from 270,000 delinquent accounts, according to the Denver-based National Conference of State Legislators.

Florida has studied the matter since 1983, and one of the state`s top tax officials believes an amnesty could eventually be enacted by the Legislature.

``I think there`s a definite momentum occurring,`` said Larry Wood, director of Florida`s division of tax collection and enforcement. ``In terms of legislative interest, it didn`t go anyplace last session, but with the type of attention amnesty is getting, there could be some serious consideration next year.``

Whether amnesty programs are successful depends upon one`s viewpoint. Although they generate millions of dollars, what proportion that represents of the total owed in back taxes is unknown.

``The amount of delinquent taxes is a very elusive thing,`` Wood said. ``There are 39,000 delinquent accounts in sales tax alone each month -- if we knew who was cheating and by how much, we`d collect it.``

Moreover, California`s amnesty included previously identified delinquent taxpayers against whom legal action was pending, so it is likely that money would have been collected anyway.

Still, Wood and others say amnesties generally bring in funds that would probably go uncollected and that once a delinquent taxpayer comes forward, records are updated and future compliance is enhanced.

``An amnesty would probably benefit every state, because if you do it, you`re going to get more money,`` said Gerald Miller, executive director of the National Association of State Budget Officers in Washington, D.C.

But he added that many states with tax amnesties have personal income taxes, the area where most of the evasion occurs. Personal income taxes are a prerequisite for impressive amnesty collections, Miller said.

Florida has no tax on personal incomes, and Tallahassee-based Florida TaxWatch Inc. -- which favors an amnesty, followed by stiffer fines and enforcement -- notes in its May newsletter that ``it is extremely doubtful that Florida would experience the kind of revenue gains that occurred in Illinois, California and Massachusetts.``

Still, Corina Eckl, a research analyst with the Denver-based National Conference of State Legislators, notes that amnesties can produce a windfall. California expected to generate about $70 million but collected more than double that, she said. Massachusetts expected only $3 million, but got more than $80 million.

Amnesty critics say that such programs shortchange the honest taxpayer, since tax cheats, who illegally retained use of their money, can end up avoiding the penalties of doing so. And that can add up to big savings.

Florida law prohibits the waiving of its 12 percent annual interest charge on delinquent tax accounts. But in cases of willful neglect, for example, the penalty is 50 percent of the tax owed. Should the sale of a boat be declared exempt from sales tax because it`s to be transported out-of-state within 10 days -- and then its owner permanently moors the craft in Florida -- a 100 percent penalty is assessed.

Nevertheless, Wood in Tallahassee thinks an amnesty would ultimately make things easier on the law-abiding because the tax base would be broadened. And a Texas tax official, John Moore, notes that ``We didn`t do this for the half- million we collected in February (1984). We did it for the millions they`ll pay us from now on.``

Although Illinois has enacted two amnesty periods, such programs are generally established as a one-time thing and are most successful when a state`s legislature approves funding for advertising and promotion. Massachusetts` efforts resulted in responses from taxpayers in 49 states and 12 foreign countries, Florida TaxWatch reports.

But amnesties differ. Arizona waived only criminal prosecution, not penalties, but allowed installment payments of back taxes. New Mexico, which has authorized an amnesty for its 1986 fiscal year, would waive both interest and penalties.

U.S. Sen. Alan J. Dixon, D-Ill., recently introduced a bill in Congress calling for a federal tax amnesty, but it has received a cool reception. Meanwhile, Miller in Washington, D.C., notes the Internal Revenue Service could -- ironically enough -- make future statesponsored amnesties less effective.

The IRS -- which estimated delinquent taxpayers owed Uncle Sam $81.5 billion in unpaid income taxes for the 1981 tax year, the latest figures available -- is not bound by state-proclaimed amnesties. And agency spokesmen say taxpayers who come clean during amnesty will face additional scrutiny by federal tax collectors.